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Africa expected to become growth powerhouse in 2020

26th August 2011

By: Jean McKenzie
Creamer Media Feature Reporter

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There are currently some 220-million Africans on the continent that are just able to meet their basic needs; however, by 2015 it is expected that these same people will become higher-level consumers with more expendable income, said Frost & Sullivan business unit leader for the chemicals, materials and food industry, Mani James. He was speaking to chemical and food industry business leaders at a session of the Growth, Innovation and Leadership 2011 Africa event, in Cape Town on Thursday.

This growth is expected to affect all major industries, as markets in Africa begin to expand. Mining, energy, water, chemicals and fast-moving consumer goods, among others, will be affected.

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“This increase in consumer numbers on the continent is one of the factors that will open up many opportunities for chemicals, food and materials suppliers into Africa. From 2000 to 2009, we saw the percentage of households in Africa with discretionary spending power increase from 35% to 43%,” James noted.

Frost & Sullivan believes that mega trends going forward to 2020 will affect Africa’s growth and development. These trends include increasing urbanisation, infrastructure development, the rebuilding of war-torn countries, public-private sector investment to drive industry development, the need for sustainable development and improvements in healthcare. These trends will create opportunities for businesses to grow in the areas of health, water, housing, energy, information technology, oil and gas, transport, manufacturing and agriculture, James said.

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Growth

New trend analysis shows that the potential market size in Africa in 2020 for water-related technologies, including sanitation, water infrastructure and chemicals, is estimated to be $700-million. The market for oil and gas technologies, which will cover infrastructure needs, extraction chemicals and rehabilitation, is estimated to be a staggering $3.6-trillion by 2020.

The estimated African market size in 2020 is estimated at $50-billion in the agricultural sector, $800-billion in the energy sector, $204-billion in the manufacturing sector and $400-billion in infrastructure development.

“I think there is significant growth for the future on this continent. These are some of the areas and sectors we believe investors should be aware of when preparing their growth strategies,” said James.

However, he warned that South Africa would not be the only dominant force in the future. “This position is going to be challenged. East Africa and a number of other key countries in Africa are challenging South Africa’s dominance, with more global chemical companies relocating to Africa,” he explained.

Opportunities

Speaking in response to James’ presentation, a panel of chemical industry leaders discussed the current opportunities and challenges in the African market.

Protea Chemicals GM for West Africa Errol Bosman said that South Africa is by no means a dominant player in the oil and gas industry, with 75% or more of chemicals in this sector being imported from outside Africa. However, Bosman agreed that there were “huge” opportunities for companies in South Africa to explore in Africa.

Dow Southern Africa country manager Sazi Lutseke, however, said that in terms of the actual manufacture of chemicals, South Africa is still the most developed in Africa.

“The sheer cost of putting up a chemical plant prevents many African countries from participating in this area,” she said.

The panel further discussed the current challenges that are seen in entering African markets.


A key area that was identified was a lack of understanding of the needs of the local markets in terms of products and scale. Bosman cited a case in Angola where Protea Chemicals tried to sell 25 kg or 50 kg bags of fertilizer to local farmers, but residents preferred to buy per cup. This was a foreign scenario that was difficult to understand from the South African company’s perspective.

Further challenges in Africa mentioned by the panel were finding suitable partners in African countries with which to work, effective skills transfer to local staff, a lack of corporate governance and political instability.
 

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